T&T’s energy reality grows worse

From the daily/weekly reports of the energy news services it is now plainly obvious that our energy reality grows worse in the 1st quarter 2015 which which will impact our fortunes for the 2nd quarter 2015 negatively in an election year. This negative impact is precisely because we are a gas based economy as the denial talk about gas realities being different from oil thereby insulating T&T’s revenue and hard currency gleaned from the energy sector is political denial attempting to soothe the populace whilst effective counter-measures to this reality are not even in the public conversation between the government and the populace. The price per MMbtu of LNG sold in Asia fell before the USD 8 per MMbtu recently as the price actually obtained for cargoes sold is under increasing pressure. Spot sales are now being increasingly dominated by traders who don’t necessarily own LNG production assets which indicate that in order to move inventory producers are selling to the trading houses at a discount. Lesson for T&T is: on world energy markets in the 1st quarter 2015 supply is outstripping demand which is a bad portent for the 2nd quarter 2015 as the election day looms. Given the disparity between the price obtained from T&T from LNG produced from trains 1 to 3, and the disparity in prices between south west Europe and Asia Spain became the largest source of re-loaded LNG in the world and the people of T&T did not share in this windfall. Enagas S.A. which is partially owned by Repsol is the major player in this Spanish reality but in the 1st quarter of 2015 re-loads from Enagas to Asia have ceased as the price per MMbtu in Asia fell below USD 8 per MMbtu. The question now arises is what will Enagas do with this LNG that it has no Spanish and European demand for and the impact on prices as increased supply is placed on markets. LNG for south west Europe has fallen below USD 7 per MMBtu. Contrary to the ole talk the LNG prices are falling now not expected to do so in May 2015 and will impact the revenue collected in the 1st quarter 2015. Click the links and get the gory details if you dare:

http://finance.yahoo.com/news/global-lng-price-slump-deepens-144505586.html;_ylt=AwrBEiHBGM5UWzoA7aHQtDMD

http://www.bloomberg.com/news/articles/2015-01-27/spain-lng-loadings-halt-for-first-time-since-2012-as-prices-drop

The next reality that grave attention must  be paid to is the future of BP. The announcement of a group wide wage freeze and the request for employees of BPTT to accept the VSEP package offered are simply public expressions of changes being rolled out in the exploration and production arm of BP which impacts T&T. The announcement that BP will hand over its operatorship of the Gila and Tiber oil discoveries and the Gibson exploration prospect to ChevronTexaco in the US Gulf of Mexico speaks volumes for a company with a major footprint in the US market. More to come. Click the link:

http://www.worldoil.com/news/2015/1/28/chevron-takes-control-of-bp-deepwater-gulf-of-mexico-discoveries

Don’t be fooled with the ole talk about declining rig count in the US blazing the way for a recovery in the price of oil and don’t be fooled by the rise on Friday last as speculators who were short oil bought on the expectation they will sell at a profit inn the future. There is a US delay in well completion or a well completion backlog of 3-7 months in US shale oil plays. This simply means that the drilling of the rig is finished but it has not been completed to enable production. It is only when this backlog is effectively addressed that US production will in fact drop. With the US now cast in the role as the new swing shift producer then we are looking at the 3rd quarter and given the size of US oil and gas inventories at present brace for a rough geo-political ride. The reality is that world realities are now impacting the strategy to win the election due in 2015. Karma! Click the link and learn reality is never one dimensional.

http://www.ogj.com/articles/2015/01/eia-stable-oil-production-outlook-in-lower-48-despite-near-term-rig-count-reduction.html

http://www.rigzone.com/news/article.asp?hpf=1&a_id=136944

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